The false choice between veteran-owned and disadvantaged businesses

In fact, two-thirds of veteran-owned businesses qualify as "disadvantaged"

Regarding SBA’s well-timed Veterans Day press release, SBA Clears VetCert Program Backlog to Put Veteran Entrepreneurs First, it’s good that SBA has cleared the VetCert program backlog. But the messaging around that achievement is unnecessarily clunky. The release blames the prior backlog of SBA veterans-certification applications on the 8(a) program, when it is almost certainly more attributable to SBA’s halting certification approvals while switching to a new certification platform. And the release referred to SDBs as “socially disadvantaged” when the acronym actually stands for “small disadvantaged business.”

But here’s what bothered me most: The press release sets up a false dichotomy that a business is either veteran-owned or disadvantaged, but not both. The release suggests that increasing contracts to SDBs (small disadvantaged businesses) somehow hurts veteran-owned small businesses. The release seems to assume that veteran-owned small businesses don’t qualify as SDBs, stating:

In January 2024, the Biden Administration took drastic action to increase the percentage of federal contracts that were required to be awarded to “socially disadvantaged” businesses, shifting the federal goal from 5% to 15% - an act that unfairly tipped the scales against any small businesses that did not qualify, including veteran-owned small businesses.

With that language, the press release appears to pit veteran business owners against so-called socially disadvantaged businesses, particularly those in the 8(a) program. The idea is that, if SBA had shifted resources to SDBs and 8(a) firms, it was doing so at the expense of veteran-owned small businesses. This presumes that most of, if not all, veteran-owned small businesses are not SDBs.

Here’s the truth: The vast majority of veteran-owned small businesses are SDBs. Of the 24,228 businesses certified by SBA as veteran-owned or service-disabled veteran-owned, 16,300 are registered in SAM.gov as small disadvantaged businesses. Two-thirds of veteran-owned small businesses are SDBs.

How can the figure be so high? First, SDB is a self-designation in SAM.gov. SBA doesn’t certify SDBs, and designating your business as an SDB doesn’t lead to any preferences. The only purpose of the SDB designation is for contracting goals, both at the prime contracting and subcontracting level. When the Biden Administration raised the SDB goal to 15%, it did so for self-designated SDBs. You don’t have to be 8(a) or women-owned to designate your business as SDB.

Second, SDB does not require that the owner belong to an underrepresented racial category. The “disadvantaged” in SDB refers to individuals who have experienced bias or discriminatory conduct, but it doesn’t need to be because of race or sex. SBA lists other reasons: disability, long-term residence in an environment isolated from the mainstream of American society, or other similar causes. Seeing as how most of the veteran-owned certified firms are led by veterans with a service disability, it’s very likely that they base their disadvantage on disability.

And third, being SDB also requires “economic” disadvantage—that’s why the ‘S’ doesn’t stand for “socially.” To be economically disadvantaged, the business owner must meet SBA thresholds for net worth ($850,000), three-year personal income ($400,000 average), and total assets ($6.5 million). I found some data that middle-aged veterans have lower net worth than comparable non-veterans, and veterans’ labor-force participation is lower. This means that veterans might be more likely to satisfy the economic-disadvantage criteria.

The point that the release makes about SBA shifting dedicated resources away from the VetCert program is partially true. But the keyword in the release—used three times—is “dedicated.” From what I can find, the shift wasn’t directly to the 8(a) program. Instead, VetCert resources more likely shifted to the new consolidated certification platform called MySBA Certifications. Prior to MySBA Certifications, each certification program had a separate application. The new platform handles all of SBA’s contracting certifications, including veteran-owned. The platform also handles women-owned, 8(a), HUBZone, and—eventually—mentor-protégé applications. So, no, veterans don’t have a “dedicated” platform anymore, but it’s not entirely because of the 8(a) program.

The higher SDB goals helped veteran-owned businesses

So what about the press release’s claim that increasing the SDB goal “unfairly tipped the scales” against veteran-owned businesses? It’s not true, according to the data.

From 2021 to 2024, the period in which the higher SDB goal was in place, contracting dollars to service-disabled veteran-owned businesses increased. In fact, contracting with service-disabled veteran-owned small businesses increased more than contracting with SDBs. So, if the higher SDB goal did anything, it helped veteran-owned contracting even more than it helped SDBs themselves.

The reason for this is simple: the SDB goal turned emphasis to small-business contracting. Most of the implementation of the goal was procedural. Agencies conducted more market research and collaborated more with small business specialists and SBA. Senior managers focused on small-business goals because the small-business goals were put in their performance plans. And agencies prioritized resources for their small-business staffs and trained contracting officials on how to use the small-business preference programs. As a result, contracting with small businesses—all small businesses—reached a record 28.7%.

That emphasis brought about by the higher SDB goal is now gone. As a result, veteran-owned small businesses have been hurt, roughly in the same measure as SDBs. Service-disabled veteran-owned contracting in FY 2025 is currently at 4.94%, below last year’s achievement of 5.14% and below the governmentwide 5% goal. That number might dip even lower in the final FY25 data because Defense contracts—which haven’t all been reported yet—have lower veteran-owned spending than the government as a whole. So, the Federal government may miss the governmentwide service-disabled veteran contracting goal for the first time since 2011.

The decline in contracting with veteran-owned businesses in 2025 has a lot of causes: DOGE, consolidation, and lower socioeconomic spending from the VA. The data shows that the socioeconomic categories tend to rise and fall together. Rather than trying to shift dollars between the programs, the more effective strategy is to create more opportunities for small businesses as a whole.

Veterans are a big part of the 8(a) program too

In another development last week, the Treasury Department and the SBA jointly announced an audit of all of Treasury’s 8(a) contracts. The press release referred to the 8(a) program as “DEI-based contracting.” That characterization, though, ignores that race isn’t the only way that companies can get into the 8(a) program. Since 2023, when SBA began requiring narratives for all individual-owned 8(a) applicants, the program has been equally open to individuals with disabilities or those from isolated environments.

And that includes veterans, particularly because of the disability criteria. Veteran-owned 8(a) companies now receive almost 10% of 8(a) contract dollars. That’s ahead of all but one of the separate racial categories on SAM.gov (which the FAR Overhaul removes):

The reason that these don’t add up to the 8(a) total is that entity-owned 8(a) firms (those owned by Alaska Native Corporations, Native Hawaiian Organizations, or Indian Tribes) receive 60% of the program’s dollars. Those aren’t reflected in the table above. In fact, over 70% of 8(a) dollars go to firms that are owned by Alaska corporations, Hawaii non-profits, tribes, or service-disabled veterans. Those groups don’t fit the label of “DEI-based contracting.” But that’s what the 8(a) program looks like now. The program is dominated by entities that qualify using legislative preferences and by veterans that qualify based on disability.

Treasury’s and SBA’s crackdown on the 8(a) program comes at an odd time because SBA’s new policy requires all companies—regardless of the owner’s race—to establish bias or discrimination at an individual level. A company owned by a disabled veteran now has the same opportunity to get into the 8(a) program as a Black-owned business. But now that the playing field has been leveled for non-minority business owners, agencies like the Treasury are withdrawing contracting support for the program. The number of new 8(a) awards is down about 25%. And this new class of 8(a) firms, even though they were admitted under racially blind criteria, face a wave of audits and intense scrutiny. Those 8(a) firms include hundreds of veteran-owned businesses, many of which were simply taking advantage of the opportunity created by SBA’s new policy.

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